Acquiring an affordable house and lot has been a dream and achievement for most Filipinos. But besides all the excitement and elation of having your own home, you as a buyer have the responsibility to familiarize yourself with the basic home buying terminologies. With these, you will be able to explore numerous opportunities in making the best out of your capacity and avoid or lessen the possibility of fraud as you are essentially equipped with elementary knowledge necessary for buying your home.
In the Philippines, buying an affordable house and lot, condominium, or any real property is truly an overwhelming process as there are a good number of required documents and other fees you must consider in making your final call. At times, this rigorous and tedious process is accompanied by highfalutin terms and technical jargons that seems to be complicated especially for most home seekers. As such, Bria Homes will provide below some of the basic home buying terminologies, arranged alphabetically, to guide you in understanding these terms and help you make your best decisions.
A means or method of acquiring property that has appreciated in value as a result of modifications or additions or the produced of the property. Ownership of a piece of property includes all the added improvements made in the property. For example, an affordable house and lot comes with a yard with fruit bearing trees, the value of these trees are added to the whole value of the property.
A common type of mortgage where the final payments of the mortgage are higher than the initial payments for a property. Though mostly common in commercial properties, this type of mortgage is at times applicable in buying for a house.
Capital Gains Tax
According to the Bureau of Internal Revenue (BIR), this is a type of tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines, including pacto de retro sales and other forms of conditional sale.
A Deed is a legal document that transfers ownership of real property from a seller to a new buyer. The document has the description of the property, including the property lines and denoted the seller and the buyer. Both the buyer and the seller must sign in the document to make it official.
The value of a property, determined by a home’s market value and remaining interest. As you make mortgage payments, your home equity increases. Oftentimes, equity is also referred to as the owner’s interest.
It is when the mortgage creditor claims the ownership of the property and sells it to make up for the unpaid debts. In the Philippines, there are various institutions that offer properties that are for foreclosure like the National Home Mortgage Finance Corporation and other private financial institutions.
The most important aspect for applying for mortgage or housing loans is your income as it shows your capacity to fulfill your financial obligations. Gross income for an individual is the total earnings before taxations and other deductions.
A close physical examination of the potential buyer of the property to assess if the price fits the fair market value and inspect and evaluate its features including the plumbing, electrical, and other essential systems for any needed repairs. Buyers can negotiate that the seller complete needed repairs or lower the home’s sale price.
The interest rate is the additional damages that a lender charges a borrower and is a percentage of the principal or the amount loaned. Every type of loan, including mortgages, has an interest rate.
A lien is a claim or legal right against assets that are typically used as collateral to satisfy a debt. Commonly, liens are always against real properties. This may sound similar to collateral but it is important to take note that lien is the claim or interest while the property is the collateral.
Maceda Law (Republic Act 6552)
The Maceda Law or the “Realty Installment Buyer Act” is a public policy or measure to protect buyers of real estate on installment payments against onerous and oppressive conditions. The rights of a buyer who defaults on installment payments are outlined in the measure. It also lays forth the requirements for buyers to be eligible for refunds and grace periods.
This is what remains from one’s gross income after all the taxations and other deductions. This is the most common basis of any lender to assess or evaluate the borrower’s capacity to meet the financial obligations of any loans.
This is a set amount of time during which a home is open to the public for viewing by potential buyers.
PITI- (Principal, Interest, Taxes, Insurance)
PITI are the total component of the mortgage payment. These include principal amount loaned, the interest that is charged against a loan, property tax or amilyar, and the homeowners insurance and private mortgage insurance. Many of those in monthly residential mortgage payments include these items.
Real Estate Broker
Real Estate Brokers are licensed professional salespersons that act as agents for a real property company whose primary task is to educate the potential buyers of the advantages of one property and help them realize their dream home. Aside from their monthly salary, real estate brokers earn more through commissions after every successful transaction.
Since financial capacity to pay has the largest share in the pie of considerations for the approval of any housing loan or mortgage applications, there are some circumstances wherein your broker or agent may ask for your spending plan or monthly expenses plan to help you manage your finances to meet your upcoming financial obligations.
Title Insurance Policy
A kind of real property insurance which insures a specific amount for any loss or damages caused by defects of title to real estate, wherein the insured has an interest. Homebuyers obtain title insurance to protect the lender’s interest.
A formal process by which a lender evaluates a borrower’s application for approval with the primary goal of assessing any loan risks.
Variable Rate Mortgage
It is a type of home loan or mortgage where the interest rate is not fixed in the whole duration of the payment terms. This is commonly adjusted, usually quarterly, based on an economic indicator like the Bangko Sentral ng Pilipinas interest rate.
Zone value is the identified zonal schedule of fair market value on real property by the Bureau of Internal Revenue (BIR) as the basis for the computation of various taxes. Aside from the BIR, the local government units, through its assessors, also have the capacity to identify the fair market value of a specific house and lot depending on the location.
Read Also: Zonal Value of A Property, What is it?